Budget Approval Memo from State Budget Director - Madison ...

SCOTT WALKER
GOVERNOR
MIKE HUEBSCH
SECRETARY
Division of Executive Budget and Finance
Post Office Box 7864
Madison, WI 53707-7864
Voice (608) 266-1736
Fax (608) 267-0372
Date: July 28, 2011
To:
cc:
From:
Subject:
Kevin Reilly, President
University of Wisconsin System
Freda Harris, Associate Vice President of Budget and Planning
University of Wisconsin System
Brian Hayes
State Budget Director
Budget Approval Memo
Now that the biennial state budget bill has been signed by the Governor as
2011 Wisconsin Act 32, your assigned state budget analyst has prepared a formal
summary of relevant budget provisions for budget execution.
The purpose of this memo is to provide more explicit information on budget intent,
some of which may not be apparent from published sources, and to give some
guidance on issues of statewide interest, such as lapses.
The memo includes the following items:
I. General Overview
II. Statewide Provisions
III. Items of Special Agency Interest
IV. Required Reports, Studies or Legislative Approvals
V. Required Appropriation Transfers or Lapses
VI. Agency Reorganizations
I. General Overview
Agencies will need to manage within the overall Chapter 20 amounts passed by the
Legislature in Act 32. A budget adjustment bill, if any, will not be a vehicle to receive
additional resources. All agencies are expected to obtain a copy of the Legislative
Fiscal Bureau's Summary of 2011 Wisconsin Act 32 when it is published and be aware
of its provisions. Impacts of the Governor's vetoes and veto messages should also be
fully understood. All decision items and other requirements signed into law by the
Governor should be covered in the summary.
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Kevin Reilly, President
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July 28, 2011
II.
Statewide Provisions
The following provides a short summary of items in Act 32 that affect all or most
agencies. Additional information if needed is provided in the paragraphs that follow.
Summary:
Compensation reserves are limited to fringe benefits and reflect a reduced level of
funding.
27th Pay Period – Fiscal year 2011-12 includes one additional pay period. This
event occurs every 11 years to adjust for differences between the length of the
fiscal year and 26 pay periods.
Lapse and transfer of funds related to:
o Unallocated lapse of $174.3 million from GPR and program revenue
appropriations with cash balances, of which $123.2 million must occur in
fiscal year 2011-12;
o Program revenue lapses related to employee compensation changes,
elimination of long-term vacant positions and across-the-board reductions;
o GPR and PR reductions related to the 2 percent pay increase received by
represented employees in June 2009.
Treatment in the Position Management Information System (PMIS) of positions
eliminated in the budget, including the elimination of long-term vacant positions.
Ten percent across-the-board reductions to most appropriations, excluding
funding for salaries and fringe benefits.
Change in procurement bid threshold from $25,000 to $50,000 to be coordinated
with Department of Administration State Procurement.
Development of a Web site on expenditures, contracts and grants. An initial
version of the Web site is now active and provides appropriation information
(http://doa.wi.gov/sboexpendchoose.asp?locid=166). Other elements will be added
over time.
Conversion of certain classified FTE positions to unclassified status (chief legal
counsel, legislative liaison, communications director).
Employee compensation changes:
o Increased WRS contributions will be treated as pre-tax.
o Health insurance and pension contribution increases first reflected on August
25th paychecks for biweekly payrolls.
o Collection for union dues and union-sponsored programs such as union
dental plans will stop as of the July 28th paycheck.

Kevin Reilly, President
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July 28, 2011
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Agency budgets have been reduced based on a full year of implementation.
However, the higher employee contributions will be delayed by three pay
periods in fiscal year 2011-12, so agencies should plan accordingly.
2011 Wisconsin Act 10 requires that the Group Insurance Board (GIB), adopt
changes to the design of the state employee health insurance plan to
accomplish a reduction of 5 percent in the annual premium costs. The
Department of Employee Trust Funds will provide more information on these
changes over the next few months. These changes will be effective
January 1, 2012.
New employee changes:
o 5 years vesting period for WRS eligibility
o Individuals must work two-thirds of full employment for WRS eligibility
Compensation Reserves
The GPR compensation reserve approved by the Legislature and signed into law
includes funding for supplementable 2011-13 costs of health insurance and other
fringe benefit adjustments. The Legislature's $15 million reduction to the Governor's
recommended level ($5 million in fiscal year 2011-12 and $10 million in fiscal year
2012-13) may impact the ability of the compensation reserve to fully fund fringe
benefit costs. Compensation reserve amounts from other funding sources were
calculated based on health insurance and other fringe benefit adjustments as well.
Agencies will not receive supplements for salary costs from any fund source and
should plan accordingly.
27th Pay Period
The additional (27th) pay period occurs in fiscal year 2011-12. For GPR
appropriations, these costs are budgeted centrally in a specific program supplement
appropriation. For non-GPR appropriations, these costs should similarly be treated as
nonappropriated reserves in program revenue accounts or segregated fund condition
statements.
Fiscal Year 2011-12 Lapses
Agencies will be assigned lapse amounts related to the $174.3 million unallocated
lapse in the near future. Attached is your plan for 2009-11 which you should
reference when developing the plan to meet the agency's assigned target. All lapses
will be processed at the end of the fiscal year as done in past biennia.
Agency Position Summary and PMIS Changes Regarding Positions Eliminated in the
Budget
Given the complexity of position changes in the budget, state budget analysts will
prepare position summaries for each of their agencies. The summary will include base
level FTE position totals by funding source and itemized position changes by
appropriation. This summary will have been reconciled to the state budget system
and will be the control document used when PMIS file maintenance adding, deleting or

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making other budget-related changes to positions is reviewed by the relevant state
budget analyst. Each agency budget director will be requested to formally sign off on
these summary documents. PMIS file maintenance submitted to implement budget
reductions will be held until all parties have signed off on these summary documents.
III. Items of Special Agency Interest
Items of special interest to your agency include the following:
Administrative autonomy relating to budgeting and financial management, tuition,
human resources, building projects, and purchasing and procurement:
1. Budgeting and financial management:
a. GPR block grants: Consolidates most GPR appropriations into two
appropriations. Maintains GPR appropriations for UW System
Administration, State Laboratory of Hygiene, and Veterinary Diagnostic
Laboratory appropriations. Requires UW System to administer proportional
shares of GPR funding to campuses in the form of block grants.
b. Consolidated PR appropriations: Creates four new PR appropriations
including: general program operations, self-amortizing debt service, gift and
non-federal grants and general fund interest for all interest earned
attributable to UW System PR appropriations.
2. Tuition policy:
a. Limits resident undergraduate tuition to a 5.5 percent annual increase in
the 2011-13 biennium; exempts differential tuition plans approved before
June 1, 2011. Permanently deletes current law limitations on tuition
increases. A special task force will make recommendations on future tuition
flexibility.
3. Human resources:
a. Personnel systems: Authorizes the UW System and UW Madison to establish
new personnel systems for their respective employees, subject to Joint
Committee on Employment Relations (JCOER) approval. Specifies that
personnel systems would include a civil service system and a grievance
process. Retains civil service protections for UW classified employees with
permanent status or completed probationary period as of July 1, 2013. All
employees hired after July 1, 2013 would have protections, privileges and
rights under new personnel systems. Transfers all UW employees from state
personnel system to new personnel systems at UW System and UW Madison
beginning July 1, 2013.
b. Supplemental pay plans: Provides that the Board of Regents and the UW
Madison Chancellor may supplement state-approved pay plans for UW
System employees and UW Madison employees, respectively, from available

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July 28, 2011
resources; plans must be approved by JCOER. Supplemental funding may
not be requested to fund increased salary and fringe costs provided in these
plans.
c. Labor negotiations: Shifts collective bargaining negotiations from the Office
of State Employment Relations to UW System and UW Madison. Creates
bargaining units for UW System and UW Madison and establishes the Board
of Regents as employer of its represented staff; and UW Madison the
employer of its represented staff, effective July 1, 2013.
d. Employee Benefits and Position Control: UW employees remain state
employees and continue to participate in state health insurance and the
Wisconsin Retirement System, but will not be counted in state position
counts beginning July 1, 2013. Board of Regents will continue to report
annually on created or abolished positions and continue to submit quarterly
position counts to the Department of Administration (DOA).
e. Position Authority: Beginning July 1, 2011, UW Madison and UW System will
be able to create or abolish non-GPR funded positions. GPR-funded
positions will be created or abolished by Legislature or Joint Committee on
Finance (JCF) except as provided under current law, except for the
UW Madison. UW Madison would be permitted to create new GPR positions
under current law through approval by the Legislature or JCF.
f. Dual Employment: Removes limitations on dual employment for UW System
or UW Extension employees.
g. Travel by UW System Employees: Board of Regents would establish travel
policies and reimbursement schedules beginning July 1, 2013.
4. Building Projects:
a. Capital Planning: UW System building projects less than $500,000 and
funded entirely with gifts and grants will not require approval by the
Building Commission and would be exempt from DOA oversight and the
Division of State Facilities (DSF) 4% project management fee, unless UW
System chooses to use DSF services.
b. Competitive Bidding Rules: Exempts building projects with costs of less than
$500,000 and funded entirely with gifts and grants from current law
provisions related to bidding. Requires the Board of Regents to establish
rules for competitive bidding for such project.
c. Gifts of Real Property: Increase the current law threshold for approval by the
Building Commission of gifts of real property to the Board of Regents from
$30,000 to $150,000. Authorizes the Board of Regents to accept gifts of
vehicles.
5. Purchasing and Procurement:
a. Procurement Bid Threshold: Requires DOA to delegate the authority to enter
into higher education purchasing consortia directly to the Board of Regents
and UW Madison. Raises bid threshold from $25,000 to $50,000. Exempts
UW System and UW Madison from DOA oversight of contractual services

Kevin Reilly, President
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July 28, 2011
including approval monitoring and periodic reviews; written justification
submitted to DOA when contractual service vendors are required;
requirement that OSER review contractual service contracts.
b. Cost Benefit Analysis: Exempts UW System and UW Madison from cost
benefit requirements for contracts and renewals greater than $25,000
c. UW Reporting for Contractual Services: UW System will continue to report
annually on contractual service procurements to the Governor, Joint
Committee on Finance, Joint Audit Committee and Chief Clerk of each
house of the legislature, as under current law.
Other Provisions:
6. Expands veterans fee remissions to include distance education, online, 100 percent
fee funded courses, and the University of Wisconsin-Madison Executive MBA
program, and increased the number of credits or semesters eligible for state tuition
remissions. Federal veteran's educational assistance that covered 100 percent of a
credit or semester will no longer count against the 128 credit or 8 semester state
assistance limit. This provision is effective retroactively, applying to students who
enrolled in the spring 2010 semester at University of Wisconsin System campuses.
7. Repeals authorization for University of Wisconsin System campuses to charge
resident tuition for undocumented persons, effective the first semester following
the bill effective date.
8. Creates a special task force on UW Restructuring and Operational Efficiencies
consisting of 17 appointed members. Staffing will be provided by UW System, the
Department of Administration and the Legislative Fiscal Bureau.
9. Beginning June 15, 2011, prohibits the Board of Regents from committing, or
allowing a UW institution, UW College campus, or UW-Extension to commit, any
funds received from the National Telecommunications and Information
Administration in the U.S. Department of Commerce related to the Building
Community Capacity through Broadband grant to any facilities, unless the funds
were committed prior to June 15, 2011, without JCF approval.
IV. Required Reports, Studies or Legislative Approvals
Agencies should carefully review the nonstatutory provisions in Act 32 and the
Governor's veto message related to the agency's programs. This language will directly
impact many projects over the next two years. These requirements for your agency
include the following:
1. Requires that an Accountability Report be submitted annually by the Board of
Regents and UW Madison Chancellor to the Governor and the Legislature. Reports

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should include the following measures: performance, financial, access and
affordability, undergraduate education, graduate and professional education,
faculty, economic development, and collaboration.
2. UW System Administration base reduction plan due to Secretary of DOA and to
JCF by September 1, 2011 for 14-day passive review.
3. Special Task Force on UW Restructuring and Operational Flexibilities report due to
Senate and Assembly standing committees on higher education and JCF by
January 1, 2012.
4. Joint Committee on Finance approval required for: UW System employees
personnel system submitted by UW System; UW Madison personnel system,
submitted by UW Madison Chancellor.
5. Joint Committee on Employment Relations approval required for: supplemental
pay plans for UW System employees, submitted by UW System; supplemental pay
plans for UW Madison employees, submitted by UW Madison Chancellor.
V. Required Appropriation Transfers or Lapses
Many agencies have requirements to make payments, transfers or lapses on specific
dates. These should be highlighted in the Legislative Fiscal Bureau Summary of
Act 32 but should, nonetheless, be verified by agencies in the documents themselves.
The budget is balanced in part on these transactions, and agencies should meet all the
applicable statutory deadlines governing the transactions. There are no specific
requirements for the agency.
In addition to any specific lapses and transfers, DOA is required to allocate a $174.3
million biennial lapse to agencies.
VI. Agency Reorganizations
The budget bill authorizes the Department of Administration to determine many of the
details of the actual transfer of programs and functions between agencies concerning
assets and liabilities, employee transfers, tangible personal property and contracts,
and decide disputes. State Budget Office staff will meet with the affected agencies to
resolve any remaining differences on transfer questions. In addition, further
information will be sent out as needed on topics such as space and accounting issues
related to the reorganizations.
If you have any questions regarding the information in this memo, please contact your
assigned state budget analyst.